Other economics
Toll roads – a burden on the working class
Four Corners recently ran a program about toll roads. Its main findings are summarized in a post by the production team: Australian drivers are paying billions on major Transurban-operated roads, and the costs will keep rising.
The TV program is largely about fines, sometimes in the tens of thousands of dollars, imposed on people who have amassed debts to toll road operators. A particular concern is the use of the public law enforcement system to collect debts from commercial firms. The program is also about the way drivers rat-run through suburban streets to avoid tolls. In fact some trucking companies, contemptuous of the public interest, actually direct their drivers not to use toll roads and to rat-run instead.
The website post is more about the inequity of toll roads. The further out from Melbourne, Sydney or Brisbane you live, the more you will spend on tolls, the burden only partly lightened by caps on tolls. By contrast people living in the inner suburbs, well served by public transport, probably encounter tolls only on their occasional trips out of the city. The website post also covers the generous escalation charges allowed to Transurban and other toll-road companies.
The New South Wales government commissioned well-respected economists Allan Fels and David Cousins to review road tolls, and they presented their report in July this year. Fels and Cousins made several recommendations: the main ones were to do with governance. They recommended what should not need to be stated, but what seemed to have escaped the attention of successive New South Wales governments, that:
the interests of motorists and the public should be put first. In particular, a more unified, fairer, consistent, simpler and improved system of tolls that contribute to a better functioning toll network should be adopted.
One practical recommendation was that “tolls should be based on a declining distance basis charged on a per kilometre basis but with the per kilometre rate declining the greater the distance travelled”. That would be of benefit to those who live in outer suburbs.
The New South Wales government seems to be reluctant to reveal much about its dealings with toll road companies, however. Allan Fels alleges that key parts of the review have been withheld from the public.
Most of the cars and trucks are rat running on suburban streets
The three state governments that have relied on toll roads to expand their urban networks are struggling to make the best out of bad decisions by past governments. Economists point out that having tolls on certain roads in an otherwise uncharged system results in “deadweight loss”, but you don’t need to have studied economics to know that there is something fundamentally stupid about incentives that result in trucks rat-running through suburban streets while high-quality toll roads lie underutilized. Nor does it require a particularly left-wing outlook on the world to realize that there is something unjust in well-off inner-city dwellers enjoying subsidized public transport while those in outer suburbs pay the full cost to use roads, including an unjustified profit to private owners. New South Wales is making amends, having extended its new Metro system to the far-flung northwestern suburbs, but there is a long way to go to serve other urban regions.
This distortion has two sources. The main one is governments’ obsession with debt. Governments are in thrall to an ideology that sees only one side of the balance sheet – the liabilities – while they ignore the asset side of the balance sheet. As a result necessary infrastructure is funded by private means, using charging systems that distort resource allocation. Instead of roads being funded by the government that can borrow at low-cost, they are funded in much more expensive private markets.
There is a general case for governments to limit their borrowing to fund infrastructure, because they may put too much demand on resources, resulting in inflation. But in the case of toll roads – and most other privatized infrastructure – there is still the same demand on resources – earthmoving equipment, concrete, skilled construction labour and so on, when the private sector does the job.
That idiocy stems from the right-wing “small government” obsession, which has resulted in the transfer of public assets, generally in situations of natural monopoly, to private owners – perhaps better referred to as “kleptocracy” or “crony capitalism”. But the left is not off the hook either. Well-off urban dwellers have been some of the strongest lobbies for public transport. Our cities need public transport, but at the same time those same urbanites have argued and lobbied against construction of roads, as if freight and tradespeople carrying their equipment can be carried on public transport, and they have ignored the needs of shift workers who work at odd times and in locations that will never be served by even the best public transport. That’s another reason governments have shifted roads off-budget: they can avoid criticism from the uninformed anti-road lobby.
There is a solution. Governments can buy out the toll road operators and carry the debt on their balance sheets. The companies would probably argue in court that they should be paid the present value of the future earnings they expected to make, but there are sound reasons for breaking unfair contracts, or contracts involving corruption. Then these roads can be brought into a road charging system that will have to be designed as revenue from gasoline taxes dwindles. States can then ensure that whatever road-charging system they develop is fair, promotes good urbanism, and is allocatively efficient.
More on gambling
While the Commonwealth prevaricates on the simple matter of banning advertisements for sports betting, there are more reports on the harm caused by excess gambling and the tactics used by gambling companies to exploit those at most risk.
The most recent evidence relating to gambling is a research report by the University of Queensland How alcohol and gambling companies target people most at risk with marketing for addictive products on Facebook, commissioned by the Alliance for Gambling Reform, the Victorian Health Promotion Foundation, and The Foundation for Alcohol Research and Education.
It finds that people vulnerable to alcohol and gambling addiction, and who are trying to break their habit, are deliberately targeted with alcohol and gambling advertisements on Facebook. The alcohol and gaming companies share data about vulnerable individuals, based on their browsing.
The Centre for Public Integrity has produced a short research report on donations by the gambling sector. It finds that since 1998-99 Labor has received $6.8 million, the Coalition $5.9 million, and the Greens nothing. It names the top ten donors, nine of which hedge their bets by donating substantially to both parties. (The link to the full report on the Centre’s website is not reliable, but you should be able to get it on this separate link.)
The Lancet has published the findings of a team of researchers who studied the operations of the global gaming industry. Its findings are no surprise, apart from one noting that “the harms to health and wellbeing that result from gambling are more substantial than previously understood”. It states:
Beyond the obvious danger of financial losses and financial ruin, these harms can include loss of employment, broken relationships, health effects, and crime-related impacts. Gambling can heighten the risk of suicidality and domestic violence. … A substantial proportion of harm is suffered by those individuals who fall below the threshold for gambling disorders outlined in the International Classification of Diseases-11 or the American Psychiatric Association's Diagnostic and Statistics Manual-5.
In political developments, Senator David Pocock has tabled a set of documents that “paint a disturbing picture of the level of access gambling companies and their representatives have to the Prime Minister and his office”. This is in contrast to the difficulty experienced by advocates for gambling reform when they have tried to put their case to the prime minister: PM’s open door policy for gambling laid bare.
News comes that the Tasmanian government, under pressure from the Tasmanian Hospitality Association and the Australian Hotels Association is wavering in its commitment to cashless gaming. (Lucy MacDonald, ABC Hobart). The Liberal government’s main proponent of gambling reform, former finance minister Michael Ferguson, has been moved to the back bench, from where he is warning that the government is likely to yield to those lobby groups. (Adam Langenberg, ABC Hobart).
Labor too, appears to have gone soft on gambling reform, suggesting that pre-commitment should be voluntary. (What would be the point?). Anglican Dean of Hobart Richard Humphrey has urged the Government to stick to mandatory pre-commitment. (Adam Holmes, ABC Hobart).
Claims about job losses and business closures are deceptive. The money people don’t blow on gambling will still be spent in Tasmania. In fact those who have been losing on pokies in pubs may be able to spend more on meals and drinks in the same pubs, actually contributing to employment, because there isn’t much employment associated with poker machines.
This is not just about Tasmania. The gambling industry is terrified that pre-commitment in Tasmania might work in cutting back on problem gambling, setting a precedent for other state governments.
Also in Tasmania, but with national implications, Andrew Wilkie is pushing for gambling companies to return stolen money. Even when a prosecution against a gambler makes it clear that the money was stolen, there is still no obligation on the gambling companies to return the funds. In fact It should be obvious to the gambling companies that when someone with normal means suddenly starts gambling heavily, the funds have probably been stolen When they see such a pattern they should undertake their own investigation. (10 minutes)
Note that the parliamentarians raising gambling issues – David Pocock and Andrew Wilkie (Commonwealth), Helen Dalton (New South Wales), Kristie Johnston (Tasmania) – are independents, and that Michael Ferguson is speaking as a backbencher who has fallen out with his party on gambling.
The government’s timid lack of action on gambling reform says something about the incapacity of the two old parties to act in the public interest. It also says something about the lack of consistent principles guiding public policy, because the government’s libertarian approach to gambling is quite at variance with its paternalistic approach to social media.